Credit Worthy News

The tax reform conference committee issued its report late Friday afternoon and the 20% HTC taken over five years was included, a provision that was introduced in an amendment by Sen. Bill Cassidy (R-LA) which reinstated the 20% rate from 10% as contained in the original version of the Senate bill. (The 10% credit for non-historic pre-1936 buildings has been completely eliminated.) Overall, this is good news for the historic rehabilitation industry and historic communities across the country. The next step will be the reconciled version of the bill to be voted on by the House and Senate this week, with signature by the President looking likely before Christmas.

While the five year provision is not ideal, it appears the federal historic tax credit will continue to be a viable program, and hopefully there will be opportunities in the near future to improve the law. (An important note: should the bill pass as is expected, those wanting to qualify for the current federal HTC program must have the "taxpayer" claiming the credit as owner of the building by the end of 2017.)

An unexpected positive development in the conference report was the inclusion of the option for 60-month phased projects under the transition rule. This was a glaring omission from the earlier versions of the bill, which only addressed the 24-month basis test counting period and created uncertainty for current and future phased projects, and was an issue lobbied by the Historic Tax Credit Coalition (HTCC).

Many thanks are due those of you that stood with the HTCC to voice your support for the tax credit. We encourage you to reach out and thank the legislators that have been champions for the incentive in critical ways, such as Sen. Bill Cassidy (R-LA) and Sen. Tim Scott (R-SC). The need for our advocacy is far from over, but we could not have gotten to where we are now without the efforts of all involved.

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A day late, but nonetheless what we expected. The House tax reform bill released this morning does, in fact, eliminate the historic tax credit. This push for tax reform is still in early days and no doubt there will be many changes, maybe even the retention of the historic tax credit, but advocacy is still of the utmost importance. Perhaps now more than ever.

The release of the proposed legislation means that we now know what we are asking for: DO NOT REPEAL THE HISTORIC REHABILITATION TAX CREDIT. It means supporters of historic preservation and believers of economic prosperity driven by historic rehabilitations need to be very specific about what this program has to offer and what we stand to lose. Last year alone, over 1,000 historic rehabilitations were completed; 109,000 jobs were created; $1.7 billion federal, state, and local taxes were generated; and these projects generated $6.2 billion in GDP.

Over the lifetime of the program (1978-2016) these numbers are staggering:

42,293 projects have been certified

2.4 million + jobs have been created

$29.8 billion federal taxes have been generated for $25.2 billion credits allocated (that's a $1.20:$1 ratio that proves the program is revenue positive)

$144.9 billion has been contributed to GDP

These aggregate numbers are impressive. But it is also the unique placemaking that comes from the reuse of historic buildings in your very own communities that demonstrate the real value of the historic tax credit.

Why are these historic buildings important to you and your community? What positive change and economic development opportunities have you seen from these projects where you live, work, or play? In what state would these places and neighboring properties be without development that was incentivized by the historic tax credit? What projects will not get developed in the future without this incentive?

Consider these questions and take action now before it is too late. We still have a ways to go before the bill becomes law. But House and Senate Republicans are promising an aggressive approach to passage and we must take this very seriously. Losing our historic tax credit would change the landscape of future development in towns and cities across the country, making it more equitable to drastically alter or demolish our historic places. Once gone, we can never replace them.

The same can be said of the historic tax credit. Once gone, an effort to replace what is lost could have uncertain outcomes. We know what Gerald Ford's administration began and Ronald Reagan continued and supported works. We know that its foundation is strong and its bones are good. We know it should not be demolished.

Join us as we stand with the Historic Tax Credit Coalition and others throughout the country to support this historic tax credit. Your contribution of words and support could make all the difference.

In 1984, Ronald Reagan was outspoken in his supportof the historic tax credit. Today, the historic tax credit is in jeopardy. Just this morning, House Ways and Means Chairman Kevin Brady announced the scheduled release of a House tax reform bill on Wednesday, November 1, and,as we understand it, the bill will NOT include the federal historic tax credit.

Last Wednesday, the Republican leadership in Congress and the Administration released a Tax Reform framework that excluded the federal HTC. Regarding tax credits, the document said:

“The framework explicitly preserves business credits in two areas where tax incentives have proven to be effective in promoting policy goals important in the American economy: research and development (R&D) and low-income housing. While the framework envisions repeal of other business credits, the committees may decide to retain some other business credits to the extent budgetary limitations allow.”

Make no mistake, the exclusion of the historic tax credit in this preliminary language is concerning.

There is good news though. Advocates of the federal HTC still have time to work to preserve the credit. But for how long is unknown. It is imperative that those that are interested in saving the program make their voice heard now and reinforce the proof that the HTC is also effective in promoting policy goals as well as having a positive impact on the American economy by stimulating investment and increasing the tax base over time, creating jobs, and preserving historic resources.

The House Ways & Means Committee and Senate Finance Committee Republicans will be integral in the retention of the federal HTC in any tax reform proposals.

If any of these elected officials are in your Congressional delegation, please seriously consider contacting them to register your support on this issue. If you are from other areas, we encourage you to voice your support as well. Here is how you can help today (and tomorrow, and the next day):

WRITEThe easiest way to advocate for the federal HTC is to work through the Historic Tax Credit Coalition. If you are able to contact any of the above committee members, please email Michael Phillips (mphillips@ntcic.com) at the Coalition. Based on your location, the Coalition team can send you the contact information for your federal legislators along with a form letter that you can cut, paste, and forward. Add a word about how you have witnessed the economic benefits of historic tax credits in your state.

CALLIf you want to take it further, pick up the phone and use your voice. Tell your representatives why you support the historic tax credit. Ask that they represent you and your community when they consider any tax reform.

REPEATAlready sent emails and called? Do it again. If you haven’t heard back from your outreach after three days, repeat your effort.

Contact us with any questions you have about these or other historic tax credit matters. And stay tuned for more information and updates about federal HTC reform in the coming weeks.

Congress believes that the rehabilitation and preservation of historic structures and neighborhoods is an important national goal. Congress believes that the achievement of this goal is largely dependent upon whether private funds can be enlisted in the preservation movement.- Tax Reform Act of 1976

A new president. An energized Congress. An aggressive approach to legislative reform. We have seen these themes dominate newspapers for the past month. In addition to the new administration, much has been made about legacies – that of the outgoing president and those of presidents past that are invoked for comparison’s sake.

President Trump and the 115th United States Congress have vowed to make tax reform a priority in 2017, and those paying attention will most assuredly draw comparisons between these efforts like the Tax Reform Act of 1986 that were overseen by the Reagan administration, a popular administration by which most Republican bodies benchmark policies and platforms.

For supporters of historic tax credits, these tax reforms were the birthplace of the current federal programs. Having originally been part of the Ford administration’s Tax Reform Act of 1976, early Reagan reform included the Historic Rehabilitation Tax Credit as part of the Economic Recovery Act of 1981.

Our historic tax credits have made the preservation of our older buildings not only a matter of respect for beauty and history, but of course for economic good sense.- President Ronald Reagan, 1984

Permanent changes were made to the federal Historic Rehabilitation Tax Credit in the Tax Reform Act of 1986 (the most extensive overhaul of the federal tax system since 1913) that reduced the income-producing credit from 25 percent to 20 percent while other real estate tax benefits were cut – a testament to the program’s value that was apparent to lawmakers. Those changes remain, 31 years later, as the basis for the program in its current form.

Supporters of the federal historic tax credit are not just preservationists but also developers, investors, architects, local business owners, private citizens, government regulators, and elected officials – both Republican and Democrats. Architecture Magazine has called it a “model of governmental initiative” and the Internal Revenue Service in 2002 stated that the Historic Preservation Tax Incentives program “is the nation’s most effective Federal program to promote urban and rural revitalization and to encourage private investment in rehabilitating historic buildings.”

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The Federal Historic Rehabilitation Tax Credit | By the Numbers

Over 42,000 historic buildings have been rehabilitated

Over 2.3 million jobs have been created

Over $117 billion in private investment has stimulated local economies

On average, every $1 in federal credit yields $4 of private investment

For $23.1 billion in costs, the program has generated $28.1 billion in federal tax receipts.

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In short, the legacy and success of the Historic Rehabilitation Tax Credit is one that should be honored in upcoming tax reform. Sweeping change proposed by Speaker of the House Paul Ryan (R-WI) currently appears to eliminate altogether incentive programs like the historic tax credit. In addition, a reduction in the corporate tax rate could de-incentivize the program even if the program remained intact. While the primary goal of historic tax credits is to serve as an economic development tool, it is also as Reagan noted a matter of respect for beauty and history that is protected by an incentive that rewards good preservation.

(An argument can be made that is also a matter of sustainability. But a topic for another day.)